Archive for the ‘Law’ Category

New Must Read Blog by Rich Baer, General Counsel Qwest Communications

One of my absolutely favorite lawyers has started a blog: Reliance on Counsel.  It’s written by Rich Baer, currently the general counsel and chief administrative officer at Qwest Communications.  It’s going to be a must read for anyone wanting to see how one of the most innovative lawyers in the country thinks.  Rich has promised a level of candor and openness not seen today in other offerings.  It’s going to be much more than about law, but leadership, technology and common sense.

Rich is also in the middle of a job search as the merger between Qwest and CenturyTel closes soon.  I predict that he won’t be out of work for long, having recently won and award for Law Department of the Year.

Welcome Rich to the blogosphere!

March 16th, 2011     Categories: Law, Law Firm 2.0    

Brightleaf Automates the NVCA Model Documents (a.k.a. Why Brad Feld will Succeed)

If you are a reader of this blog, or Brad’s you know that we are keenly interested in the ideal that we should be able to arrive at a model document set for venture financings.

Whereas, I argued that he’d never succeed in coming up with a standard set of seed documents, I used the story of the model form document project from the NVCA.  The project actually produced model forms of documents, but most of us were disappointed by the actual usage.  In my opinion, this was because the documents had too many options and took lawyers a while to deal with them.  (For instance founders reps which you never see on the West Coast and things like that).

But at the same time, these documents live and breathe and are updated by some of the great minds in our business on a regular basis.  I feel safe in saying that are more vibrant and accurate than most law firms. 

Today, I’m delighted to announce that our portfolio company Brightleaf has released their platform including the standard form of NVCA documents.  In short, their document automation and assembly software can save lawyers a ton of time using the NVCA forms, while giving them the piece of mind that they are always using the latest and greatest forms in the business. 

Oh yeah.  Did I mention that it’s FREE?

They are offering free “NVCA ASAP” trial accounts to a limited number of VC’s and Emerging Companies law firm practices. For more information about the project (and how to get a trial account) please visit their NVCA ASAP page here.  For a quick overview demo of how Brightleaf works, watch the video here

This could quite possibly be the tipping point in getting us to one standard set of documents.  Maybe Brad won’t fail after all. 

November 5th, 2010     Categories: Financings, Frustrations, Law, Law Firm 2.0, Venture Capital    

Great Opportunity – General Counsel Position Open for Bay-Area Company

One of my friends and all around good guys, Cal Finch wanted me to get the word out about his company, CPP, hiring a new General Counsel.  Here’s the scoop:

We are seeking a strategic, collaborative, customer-service oriented General Counsel who meets the following qualifications to join our exceptional team and company:

  • The General Counsel will possess an LLB or JD degree from an accredited law school and at least 10 years professional experience as a lawyer with extensive experience in international and domestic contract negotiation and drafting, mergers & acquisitions, corporate law, international and domestic corporate compliance, and litigation management required; experience in publishing or media industries and intellectual property law would be ideal
  • 5 years experience managing individuals or teams
  • Excellent oral and written communication skills
  • Ideal candidate will have expertise efficiently and cost-effectively managing outside counsel
  • Demonstrated ability to work collaboratively with all employees and other key stakeholders
  • Excellent management, leadership and problem solving skills focused on delivering superb customer service
  • Demonstrated advanced ability with key business computer applications such as Microsoft Word and Outlook; moderate level of abilities with Excel and PowerPoint

Your responsibilities will include:

Ensuring that organization-wide business strategies, policies and programs are developed and applied in full recognition of all legal implications and risks, including the formulation of internal policies to insure the proper use, enforcement and defense of CPP’s and its licensees’ legal rights, and CPP’s general compliance with applicable law and compliance with contracts. Consult with CPP management and Board of Directors and advise CPP staff as appropriate to assure the overall advancement, maintenance and protection of CPP’s business and legal interests within applicable legal constraints, which includes overall responsibility for the registration and management of CPP’s intellectual property and the prosecution or defense of CPP business interests. Act as the manager of the Legal Division while providing legal services as a practicing counsel and managing relationships and matters with outside counsels. Ensure that the legal affairs of CPP are attended to in an effective and efficient manner and that all legal records are properly compiled and securely maintained for the required time period. Act as Corporate Secretary.

If you would like to make a significant contribution to CPP’s business goals and join a team of cross-functional experts who are passionate about CPP’s products, team collaboration and achievement, and professional excellence, please email your resume to:

Katie Flotten, Director, Human Resources

CPP, Inc.

Mountain View, California


In the interest of time,

your cover letter, resume & salary history MUST be included

for your candidacy to be advanced

October 30th, 2010     Categories: Law    

So You Want to Go to Law School?

As if there wasn’t enough bad mojo for those considering going to law school, now this.  But I had to post.  It’s just so darn funny.

October 21st, 2010     Categories: Just For Fun, Law    

A Very Unique M&A Deal Terms Study

I read a lot of M&A deal term summaries.  While I really appreciate the knowledge gleaned from these reports, they all suffer from the same problems:  They are usually biased toward publically filed transactions and those particular deals serviced by the particular bank or law firm whom is author of the report.

Today, Shareholder Representative Services (SRS) is releasing their 2010 SRS M&A Deal Terms Study, which is a comprehensive analysis of deal terms from a sample of the more than 100 transactions for which SRS serves as the shareholder representative. 

The underlying pool of deals differs in important ways from those analyzed by other similar studies.  The transaction agreements analyzed by SRS generally were not publicly filed and are a good representation of what is happening today in venture-backed M&A.

This study will be the first of a series of information products from SRS designed to leverage their expertise and knowledge to help their customers in their deals.  Future offerings will include data regarding what actually happens, long-term, with escrows and earnouts along with an analysis of claims made against the target company.

You can view the full report here.

October 14th, 2010     Categories: Company Running, Law, Venture Capital    

The Convertible Debt Debate – An ex-Lawyer’s Twist on the Argument

Today, my partner Seth wrote a great piece on the merits of early-stage startups raising convertible debt rounds versus traditional preferred stock equity structures.  The piece was inspired by Paul Graham’s recent tweet that said:  “Convertible notes have won. Every investment so far in this YC batch (and there have been a lot) has been done on a convertible note.”

Seth’s piece is a must read in this debate that is only gaining more participants, including a nice follow up from Mark Suster about his thoughts.  I can’t do justice to either Mark’s or Seth’s pieces trying to summarize them, so I strongly encourage you to read them.

I’m going to go out on a limb and break out my old law bar card and bring up one issue that I don’t think is getting enough focus in the debate:  the use of debt fundamentally changes the fiduciary duties of managers and board member of the company.

If a company raises cash via equity, it has a positive balance sheet.  It is solvent (assets are greater than obligations) and the board and executives have fiduciary duties to the shareholders in the efforts to maximize company value.  The shareholders are all the usual suspects – the employees and venture capitalists.  Life is good and normal. 

However, if a company is insolvent, the board and company now owe fiduciary duties to the creditors of the company.  By definition, if you raise a convertible debt round, your company is insolvent.  You have cash, but your debt obligations are greater than your assets.  Your creditors include your landlord, anyone you owe money to and folks that you might owe money to you, like former disgruntled employees and founders who have lawyers. 

How does this change the paradigm?  To be fair, I have had no personal war stories here, but it’s not hard to construct some weird and scary situations.

Let’s look at the hypothetical:

Assume the company is not a success and fails.  In the case of raising equity, the officers and directors only own a duty to the creditors (landlord, etc.) at such time that cash isn’t large enough to pay their liabilities.  If the company manages it correctly, even on the downside scenario creditors are paid off cleanly.  But sometimes it doesn’t happen this way and there are lawsuits.  When the lawyers get involved, they’ll look to try to establish the time in which the company went insolvent and then try to show that the actions of the board were “bad” during that time.  If the time range is short, it’s hard to make a case against the company.

However, if you raise debt, the insolvency time is forever!  Not just when cash got below the ability to pay liabilities like the equity situation, because the company has never been solvent. 

What does this mean?  It means that if your company ends up failing and you can’t pay your creditors, landlords, etc. that their ability for a plaintiff lawyer to judge your actions has increased dramatically.  And don’t forget, if you have any outstanding employment litigation, etc., all of these folks count as creditors as well.   

The best part of all of this is that many states impose personal liability on directors for screwing up things while a company was insolvent.  Read this to be:  “some states will allow creditors to sue directors personally for not getting all of their money they are owed.” 

Now I don’t want to get too crazy here.  We are talking about early-stage / seed companies and hopefully the situation is clean enough that my doomsday predictions won’t happen, but my bet is that few folks participating in convertible debt rounds are actually thinking about these issues.  And no, I don’t know of any actual cases out there, now.  But I’ve been around this business long enough to know that there is constant “innovation” in the plaintiff’s bar as well. 

August 30th, 2010     Categories: Financings, Law, Venture Capital    

Keep Things Simple

Today, I was called for jury duty.  Upon arrival, we sat for 30 minutes, then we watched a 12 minute video for juror orientation. The voiceover kept cracking me up, however, as they were unable to pronounce “voir dire” correctly.  (Think “vor dire” as in Dire Straits).  If you don’t believe me, watch the video.

Anyways,we kept moving rooms, filling out forms, being segregated into different piles of humanity and I thought “couldn’t this be simpler?” and made some snide comment under my breath about the efficiency of government.

While I was sitting there being frustrated, I realized that over complicated things, maybe more than anything, really ruin my day.  Then I realized that I was an arrogant ass, because I’m not sure my ecosystem is all that more simple or efficient most of the time, either. 

I could write tomes on all of the efficiencies that I see every day – the same ones that I’m sure you don’t like either.  I think all this artificial complexity probably plays back into our lives in that we start to overcomplicate things that don’t need the added brain damage.  This includes both professional and personal contexts and the sad thing is that we have so little control on most of these situations.

But we should rethink about how we do things when we do have control. 

Thinking back over my career – and specifically even if I just think deeply about the last few  weeks of meetings that I’ve had -I think the number one piece of advice that I’ve given is “keep it simple.” Whether it’s a business model, financing plan, product user interface, or a plan to deal with human conflict, simple is best the vast majority of the time. 

And likewise, when I think back to those seminal moments of mentorship that I’ve been fortunate to receive, there has usually been a component to simply what I was trying to accomplish.

So, there’s my fortune cookie advice for the day: “keep it simple.”  Likely you and those around you will be happier for it. 

August 16th, 2010     Categories: Company Running, General, Law, Venture Capital    

Winery Peak – Review of 1st Novel by Chris Scott Graham

Dechert LLP litigation partner Chris Scott Graham recently released his first full-length novel.  It’s not easy as a partner to find time for hobbies, but Chris has evidently not only found the time, but found a real natural talent as well.

The story surrounds Winery Peak, a fictitious winery in Napa that unfortunately finds several of its migrant workers taking sick from toxins found in a nearby creek.  What happens from there is a story of intrigue, as the corporate parent of Winery Peak tries to pin the blame on a fall guy, Peter Dickinson who is a world-renown wine maker and head of winery.  Junior associate Richard Magnus takes the case of Peter to protect both his honor and his liberties without his client really understanding that he’s never taken a case to trial before.  And behind all of this is a shadowy corporate parent organization that pulls at the strings of all the different characters.

I really liked the novel and found the courtroom aspects really interesting.  I learned some things about litigation that I’ve never known, but you don’t need to be a lawyer to appreciate it.  It’s just a good ole fashioned mystery.

Frankly, I was somewhat surprised of the quality of the novel, not anything against Chris, but I know that he is an extremely busy attorney.  This isn’t a case of a guy having a slow practice and having a lot of time on his hands.  On the contrary, one of my  favorite litigation experiences of all time (if there can be such a thing) was a case where not only did Chris get us out of the case under summary judgment, but got the court to award 100% of our legal fees.  It was a really complicated case, too. 

Congratulations Chris on a fine first outing.  I’d encourage folks to buy the novel and support this burgeoning artist.

July 8th, 2010     Categories: Just For Fun, Law    

Bilski Redux and Why You Shouldn’t Believe Everything You Read

The Bilski decision came down yesterday and I’m still in a state of complete denial.  Basically, the court punted on the difficult issues and while denying Bilski his patent, they didn’t do anything to help the horrible state of the patent ecosystem that we have today. 

(For a great summary of the case, check out the Groklaw summary). 

To make my stomach even more upset, today I was alerted to an article authored by Ted Sichelman entitled “Why Bilski Benefits Startup Companies.”

In short, Sichelman points to a study that he was involved with and tries to come to the conclusion that these types of patents are good for startups. 

To quote him:

“in a recent survey of startup firms, the Berkeley Patent Survey—which I conducted with Robert Merges and Pamela Samuelson of UC Berkeley School of Law and Stuart Graham (now Chief Economist at the PTO)—startup executives reported that nearly 70% of venture capital firms and 50% of angel investors said that patents were important to their investment decisions.”

While I vehemently disagree with the article, what I found most interesting was a commenter who used a prior post that I wrote on why the study that Shichelman was involved in may be flawed.

Sichelman attempts to refute my post in the comment section, but fails badly.

First of all, it seems clear to me that Sichelman has intuitions on patents based on his experiences and has used the data to fit his theories, rather than using the data in an unbiased way to figure out what is really going on with patents and startups.

I make this assertion based on a couple of observations:

1. Everytime he speaks about patents, he begins with the story of his one experience with a startup company and how patents may have helped.  I’ve had dinner with Ted and I’ve heard the story.  I’ve also seen the story pop up in every situation he discusses patents.  A sample size of one does not make a scientific set. 

2. Sichelman’s co-authors are no where to be found when he comes up with his conclusions.  Ted acknowledges that he doesn’t speak for his co-authors, but very easily uses the word “we” when discussing the study and “his” conclusions.  The blog post that I wrote refuting some parts of the conclusions of the study were not all my own ideas – they were the thoughts of his co-author Pam Samuelson who herself said the article really doesn’t say anything about VC attitudes toward patents.

It’s really clear that Sichelman has a bias that was probably preconceived on a data set of one (his startup) and not supported by his fellow authors who have not backed him up publically.

Furthermore if you read his comments on my blog post, his rebuttals don’t hold water as well.  (And you’ll want to read the comments for this part of this post to make any sense).

1. Response rates – just because you are the most comprehensive study doesn’t make the study necessarily any better.  It might, it might not.  I could be the world’s tallest midget and that still doesn’t get me much (no offense to midgets, sincerely).  I never definitively said the sample size was too low, rather it’s not rock solid clear that it was the right size or targeted the right companies.  It’s not an easy thing for them to do, granted, but we shouldn’t just accept the number “1300” being thrown out and assume that this is sufficient.  And per Sichelman’s own admission in his comments, only about 175 of the respondents were VC-backed startup companies.   This is not a large number.

2.  Only 75% answered the patent question and Sichelman says this is acceptable.  This is not.  In fact, others involved with the study have specifically questioned where the answer rate was a piece of data in itself.  Again, I’m not saying definitively this is data, rather the way Sichelman uses data like this as “proof” is not dispositive. 

3. Results biased toward non-venture backed companies.  Sichelman again presents a non-compelling argument.  First, 2/3rd of the sample size, according to his co-author Pam Samuelson were D&B companies, not VentureExpert companies.  Secondly, him trying to convince readers that I only have a sample size of 25 current portfolios is either poor research on his part about me, or ignoring the facts.  I’ve been involved in VC for over a decade and with well over 250 companies, which alone is larger than his sample size of 175 companies.

4. (My Favorite) – Just because we didn’t survey VCs doesn’t mean that we don’t know what VCs think.  To quote him:

“VCs were not surveyed directly – Although it would have been more reliable to survey VCs directly, unfortunately, our time and resources were limited. Nonetheless, there is little reason to believe that the reports of executives at startup firms regarding the views of VCs during the financing process—which is lengthy and involved—are inaccurate. Rather, executives are presumably well-aware of those items that VCs found important during due diligence.

Basically his response is:  “we couldn’t afford to interview VCs, so we just guessed by asking entrepreneurs.”  This is totally bogus and backed up by Pam Samuelson herself in recent remarks at the University of Colorado law school.  This only talks about perceptions that entrepreneurs have of VCs.  This says nothing about what VCs think.  To think that one study group can be substituted for another study group and presented as fact discredits the valid parts of the paper.  This is just bad science.  If it was good science, we’d just ask parents about what their kids really thought about things. 

In summary, it’s been a rough day thinking about what could have been with Bilski.  I’m getting a ton of backchannel about the politics behind the decision, which just makes me more upset.  To try to capitalize on the poor decision with articles like this just makes me more disappointed about the system and the supposed “experts” who pretend to know much more than they really do. 

June 29th, 2010     Categories: Frustrations, Law, Patents / IP    

Interview With Rich Baer – GC and CAO of Qwest has a great interview with Rich Baer, General Counsel and CAO at Qwest.  I find 99% of interviews worthless, but this is one of the few that allows the reader to actually understand the subject a bit.

The premise of the interview is that Rich is moving on from Qwest after the announced merger with CenturyTel closes early next year.  But more than that, Rich opines on the future of the in-house law practice and looks thoughtfully inward talking about what he will do differently next time. 

Rich has been recognized as a leading innovative thinker in all matters related to in-house counsel and was awarded the 2008 Legal Department of the Year

Best of all, despite his non-friendly picture in the interview (sorry Rich) and his hard driving passion for everything he does, Rich is sincerely a nice guy who hasn’t let any of his success go to his head.  Congrats Rich on a great run at Qwest and great interview. 

June 25th, 2010     Categories: Law, Law Firm 2.0